Outdoor Sports is considering adding a putt putt golf course to its facility. The course would cost $167,000, would be depreciated on a straight-line basis over its 6-year life, and would have a zero salvage value. The sales would be $84,000 a year, with variable costs of $27,400 and fixed costs of $12,000. In addition, the firm anticipates an additional $15,300 in revenue from its existing facilities if the putt putt course is added. The project will require $2,600 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 40 percent?
Outdoor Sports is considering adding a putt putt golf course to its facility. The course would cost $167,000, would be depreciated on a straight-line basis over its 6-year life, and would have a zero salvage value. The sales would be $84,000 a year, with variable costs of $27,400 and fixed costs of $12,000. In addition, the firm anticipates an additional $15,300 in revenue from its existing facilities if the putt putt course is added. The project will require $2,600 of net working capital, which is recoverable at the end of the project. What is the net present value of this project at a discount rate of 12 percent and a tax rate of 40 percent?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Outdoor Sports is considering adding a putt putt golf course to its facility. The course would cost $167,000, would be
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